Hospital merger and acquisition activity stayed within its 10-year historic range in 2020 despite the coronavirus pandemic disruptions.
Healthcare management advisory firm KaufmanHall reported 79 M&A transactions last year, down from 92 reported transactions in 2019. However, there are signs the pandemic spurred deals, the report said.
“COVID-19 has actually confirmed the strategic rationale underlying many transactions that were already underway, and may be acting as a catalyst for innovative strategic partnerships and tactical transactions,” the report said.
Seven of the transactions in 2020 were “mega-mergers,” which KaufmanHall describes as the smaller partner or seller having more than $1 billion in revenue. That’s up from three “mega mergers” in 2019.
In general, the mergers involved larger partners, as the smaller acquired facility’s average annual revenue increased from $278 million in 2019 to $346 million.
KaufmanHall anticipates, “the lessons of the pandemic will be a catalyst in reshaping the U.S. healthcare system for years to come.”
The Covid pandemic showed why hospitals need to build resiliency. KaufmanHall believes focusing on “core” business activities will drive the direction of hospitals and health systems.
In particular, in 2021, the firm believes there will be significant growth in partnerships among different healthcare verticals.
“Even as health systems divest non-core assets in areas such as skilled nursing, home health, behavioral health, laboratories, and post-acute care, these divested assets may be replaced by partnerships with specialty service providers to ensure health system consumers maintain access to a full continuum of services,” the report said.
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